One lesson, or perhaps an underlying truth: change affects everyone, just at different times and in different ways. If you can identify what kind of wave may be coming by seeing what is happening to others, you improve your chances of spotting it earlier.

Continuing on this occasional topic, yesterday I was reading a profile of the company that was touting its early warning system. The company described how it’s set up a team to monitor and deal with “megatrends”, trends at least 5 years out that could have a material impact on the business. To summarize it, a senior officer was selected to identify these overarching trends and their potential impact on the business. Following the definition of the trends, a team analyzed the impact of the trends on the company’s strategic planning and how it would affect its efforts in the future. The entire company’s planning team was then taken through a series of workshops on the process to integrate the megatrends into their planning, to identify potential successes and the routes to get there.

So?

There are at least three things wrong with this, maybe more:

First is the process of identifying the so-called “megatrends”. Without more on the process, it seems very introverted and therefore likely to miss the trends that really matter, because they are almost by definition the trends that are not being noticed by the company at present.

Second, this process is relatively static, in that it appears that the identification of the “megatrends” is a one time or, optimistically, an annual effort. However, megatrends do not show up and grow on schedule. For a case example of that, witness the relatively fast creative destruction of the American newspaper and magazine industry by the Internet.

Third the whole process seems to be premised on the fact that if the company can identify megatrends then it can identify new opportunities for the future. It totally ignores the fact that some megatrends may well provide only threats not opportunities.

The first stages of the early process are among the most important, and require not a top-down team, but an integrated effort using employees from across the company as well as consultation with outside experts. This example is one that will not go well.

Early warning systems have been one of the more talked about aspects of strategic planning and competitive intelligence, but are at the same time, one of the most misunderstood and difficult to execute over the long term.

Why is that?

One reason is that those charged with providing early warning are given an almost impossible task. That is, they are to be on the lookout for unknown threats from unknown directions and unknown sources, and then to identify them sufficiently early that the company can take action to avoid them, exploit them, or mitigate their impact. Now think about that charge. It resonates of former Secretary of Defense Donald Rumsfeld’s “unknown unknowns”.

Such a task is one which is almost designed to fail. Individuals or teams providing early warning have little to show on a regular basis, simply because events and trends justifying such warnings are few and far between. If you think that measuring the impact of competitive intelligence is difficult, a subject about which Carolyn I have written[1], just imagine how difficult it is to measure the impact of and early warning system. It is often, therefore, one that is operated more on faith then other business systems, and for that reason is more likely to be eliminated during times of economic difficulty.

This is not to say that early warning should not be undertaken or that it cannot succeed. However, it is important to start with a very careful definition of what an early warning process is expected to be and accomplish, as well as to provide a precise methodology to assure that it will be operated properly, and to provide a regular channel of feedback to assure its customers that it is in fact of continuing value.

These are some of the issues that I will cover in future blogs on this important topic.

An additional force contributing to the development of competitive intelligence was the concept of environmental scanning. Environmental scanning was aimed at having business decision-makers review their entire operating environment: political, economic, cultural and social, as well as competitive. It was most often operated as an adjunct to strategic planning, providing some guidance to planners on the environment in they were working during the development and, more rarely, in the implementation of the strategic plan.

For those who are historically minded, you can see some of this in Herb Meyer’s important book, Real-World intelligence—New Edition. Grove Weidenfeld, New York (1991), where Herb uses the analogy of a pilot and radar:

“Like radar, a Business Intelligence System does not tell the executive—the pilot as it were—what to do. It merely illuminates what is going on out there on the assumption that with good information a competent executive will nearly always respond appropriately.”

Back to environmental scanning. Since decision-makers are in the business of making decisions, and not of constantly watching, environmental scanning following the development of a plan quickly became something which was handed off to others to do. It was a sort of primitive early warning system to decision-makers of trends, facts, or events that could adversely or beneficially impact a business.

That extent, it was both broader and shallower than much of competitive intelligence as we know it today. By that, I mean it was concerned with issues and targets beyond competitors, including suppliers, government regulation, the business climate, environment and weather, natural materials and natural disasters, and even war. Thus, those involved in environmental assessment were the eyes of the enterprise. They looked ahead to see what in their business environment was changing and then made a quick assessment on how that change would affect them.

For example, take healthcare services. While competition between group healthcare insurance companies certainly is a factor in the market space, other factors influencing how companies and their competitors do include state and federal regulatory trends, the overall state and future of the national economy, the growth/ lack of growth of large employers, and the growth/stagnation in the number of employees working for small businesses, the age demographics of the working population, and advances in medical care.

For reasons which I really don’t understand, environmental scanning seemed to fall off the horizon (sorry). Perhaps it is that no one person or even one unit could conceivably provide detailed, ongoing, smart and reliable evaluations of all of these factors. Or perhaps “bottom line” oriented business people could not see how paying others to watch out where they were going could possibly be valuable.

Regardless of the reason, environmental scanning remains a part of the heritage of competitive intelligence, particularly contributing to developing and managing early warning systems for competitive intelligence and strategic planning purposes.